Strictly Private & Confidential Full year 2019 results and new growth strategy Proposed equity raise of £150m May 2020
Presenters Steve Francis Kath Kearney-Croft Andrew Allner Group Chief Executive Group Chief Financial Chairman Officer Officer (Interim) 2
Chairman’s Comments – FY2019 and COVID-19 • 2019 results, albeit in line with guidance in January Trading Update, very disappointing • Full year underlying profit before tax (1) of £41.9m (2018 £74.5m) • Strategy was poorly executed, resulting in an accelerating decline in sales and adverse impact on profitability • Process underway to improve and strengthen financial systems, procedures and controls • SIG retains strong positions in its core markets • COVID-19 – our primary concern during the outbreak has been to preserve the health and safety of colleagues, customers and suppliers (1) Underlying profit before tax (including businesses held for sale), pre IFRS 16 3
Chairman’s Comments – Decisive Board Actions • The Board has taken decisive action to address 2019 performance • New leadership team in place: • CEO, CFO and MDs of UK and German businesses • New strategy that reprioritises strong customer-centric values and a commitment to proximity, expertise and service, restoring the Group's historical differentiators • Strengthening the Group’s capital structure for the long term: • Proposed equity capital raise for approximately £150m • Clayton, Dubilier & Rice LLC (“CD&R”) has conditionally agreed to invest up to £85m and acquire a stake of up to 29.9% in the enlarged share capital • IKO has indicated its intention to subscribe for its full entitlement under the equity capital raise • Discussions ongoing with the RCF lenders and private placement note holders, to reset covenants and agree other amendments to its financing facilities alongside the proposed equity capital raise • My determination, and that of the Board, is to restore value to shareholders 4
FY19 Results Overview
FY19 Summary • Underlying PBT, including businesses held for sale and pre IFRS 16, of £41.9m (2018: £74.5m) consistent with previous guidance • Underlying revenue decline of 9.0%, impacted by market share losses in the UK and Germany due to poor execution of transformation initiatives which the Board believes disconnected the business from its customers, suppliers and its front-line colleagues • The Group’s other operating companies recorded continued steady performance, reporting LFL sales growth of 1.4% • Good operating progress made through the further development of new technologies, e-commerce and increased functionalisation • Underlying gross margin up 60 bps • Underlying operating costs lower by £6.0m (1.2%), reflecting adoption of functional operating models, rationalisation of footprint and continued cost discipline • The Group reported a statutory loss of £112.7m, primarily driven by impairment charges • Net debt (pre IFRS 16) at year end of £162.8m (2018: £189.4m) and covenant leverage of 2.1x 6
FY19 Key Financials • LFL sales down 7.6%, driven by specific challenges in 2019 2019 Change Continuing Operations 2018 (post IFRS 16) (pre IFRS16) (pre IFRS16) UK and Germany in particular • 60bps gross margin improvement Revenue £2,084.7m £2,084.7m £2,290.4m (9)% LFL sales % (7.6)% (7.6)% (2.1)% n/a • Operating costs lower by 1.2% reflecting adoption of Gross margin % 25.9% 25.9% 25.3% +60bps functional operating models, rationalisation of Operating costs £(499.6)m £(505.7)m £(511.7)m £6.0m footprint and continued cost discipline Operating profit £39.6m £33.5m £66.9m (50)% • Working capital down to 4.8% of sales reflecting Return on sales % (1) 1.9% 1.6% 2.8% (120)bps unsustainable working capital management at year Profit before tax £15.6m £20.6m £52.2m (60.5)% end and residual debt factoring Profit before tax (excl. property profits) £15.3m £20.3m £49.6m (59.1)% • Group net debt position improved to £162.8m Working capital as a % of sales 4.8% 4.8% 8.4% +3.6% • Dividend reflects Interim dividend, no final dividend Net debt (as at 31 Dec) £455.4m £162.8m £189.4m £(26.6)m Headline financial leverage (2) 5.8x 2.1x 1.7x 0.4x declared ROCE (post-tax) (3) 6.1% 6.1% 10.3% (420)bps Basic earnings per share (4) (0.1)p 0.6p 6.3p (90.5)% Dividend per share 1.25p 1.25p 3.75p (2.5)p Note: Data represents underlying performance. (1) ROS% stated excluding the impact of property profits of £0.3m (2018: £2.6m). (2) Headline financial leverage figure of 5.8x post IFRS 16 is provided for illustration purposes only, covenant leverage is cal culated on a ‘frozen’ GAAP basis (3) ROCE is the ratio of underlying operating profit after tax to adjusted average capital employed excluding the impact of IFRS 16 (4) Stated before ‘Other items’ 7
FY19 Geographical Performance Revenue ROS% Op Profit Revenue(£m) 2019 PY var. (£m) PY var. (%) PY var. (£m) 2019 Decline in UK and UK * 822 (180) (23.3) 1.6% -18% Germany Germany 382 (22) (4.0) 0.9% -5% UK &Germany 1,204 (202) (27.3) 1.4% -14% France 527 7 (3.0) 3.6% 1% Poland 156 (1) 0.9 2.5% 0% Stability in Benelux 103 (5) 0.6 4.9% -5% Rest of Europe Ireland 95 (5) 0.1 6.5% -5% Europe ex Germany 881 (4) (1.5) 3.9% 0% Note:Data represents underlying performance pre IFRS 16 *UK comprises UK Distribution and UK Exteriors 8
Base Profit for 2020 – Impact of Disposals £41.9m Underlying PBT (including businesses held for sale), pre IFRS 16 £19.1m £20.6m £2.2m £41.9m Underlying PBT, £5.0m pre IFRS 16 £20.6m £15.6m £15.6m Underlying PBT, 2019 Air Handling Building Solutions 2019 IFRS 16 2019 post IFRS 16 underlying PBT (Assets held for sale) (Assets held for sale) underlying PBT, adjustments underlying PBT, (including businesses pre IFRS 16 post IFRS 16, held for sale), as reported pre IFRS 16 Note: Disposal of Air Handling completed in January 2020 9
Balance Sheet Flattered by Working Capital Movement £40m £15m £8m £22m £77m £32m £189m £163m £35m £21m (1) 2018 Cash inflow Working Other Capex Financing/ Dividends Additional Reduction in 2019 Net Debt from trading Capital Tax paid restricted cash debt factoring Net Debt Note: Financialinformation presented on a pre IFRS 16 basis (1) Other consists of £8m proceeds from sale of PPE, £8m net proceeds from sale of business and £5m FX 10
Unwind of Working Capital in Q1 2020 31 st Dec-19 31 st Mar-20 Capital Structure(£m) £4m £10m GrossCash 137 165 Gross Debt (300) (270) Net Cash / (Debt) (163) (105) £79m o/w Drawn downRCF (100) (70) £163m £9m o/w Private Placement (176) (176) Notes o/w OtherIndebtedness (24) (24) £3m • RCF matures in May 2021 • £163m Private Placement Notes mature between October £105m 2020 and June 2026 • Company in discussions with its RCF lending group and PPN holders to (1) Dec-19 EBITDA Working Capital Capex Interest Divestments Other Mar-20 amend to its financing Net Debt (loss) Net Debt facilities (1) Adjusted net proceeds from the divestment of Air Handling represents net cash proceeds prior to associated transaction costs 11
Current Trading (1) • Trading in the first two months in the UK and Germany saw a continuation of the challenging trends seen in the last quarter of 2019, whilst trading activity in the rest of Europe was relatively stable • Revenue for the first two months of the year was £296.0m, a like-for-like decline of c.11% • Gross margin fell compared to the prior period, driven by margin pressure in UK, Ireland and France • The Group posted an underlying operating loss of c.£9m (pre-IFRS16) in the first two months of the year • We started to see the impact of the COVID-19 outbreak in March and April • Revenues in March and April were significantly impacted by UK, Ireland and France site closures • Germany, Poland and Benelux were impacted by government measures to a lesser extent, trading largely as normal in March and April • Group revenue for March and April was £235.0m, down £138.9m from the prior year • During the period the Group has taken decisive cost actions in response to COVID-19 as well as accessed the government-supported job retention schemes, resulting in a reduction in group operating costs year-on-year • As at 30 April 2020, the Group had £155m of cash and a net debt position, pre- IFRS 16, of £114m (1) Covering the four months to the end of April 12
Strong Market Positions in a Critical Industry with Growth Potential
SIG’s New Growth Strategy & Recapitalisation Strong market position in a critical industry with growth potential Previous strategies have eroded USPs in UK & German businesses Decisive management change & new approach: back to basics New customer-centric strategy that reprioritises sales COVID-19: Strong management response & robust trading/ liquidity preservation Intention to raise £150m; Support from CD&R and IKO; Constructive discussions with lenders 14
Recommend
More recommend
